July was an event-filled month across global markets, defined by two key drivers: oil price swings caused by geopolitical tensions in the Middle East and a shift in how investors view the technology sector. Below is our overview of what took place in July, starting with our home market in New Zealand.

New Zealand Market & Economic Overview

Our local economy demonstrated resilience through the month, supported by strengthening business confidence.

• Inflation & Monetary Policy: In response to broader economic conditions, the Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by 0.25% to 2.50%. The RBNZ noted that while energy price pressures have softened, temporary geopolitical impacts slowed momentum in the June quarter. However, economic activity is expected to pick up again in the September quarter as confidence rebounds. Later in the month, inflation for the June quarter came in at 1.5%, aligning closely with expectations.
• Local Shares & Bonds: The NZX50 Index gained 0.6% for the month, benefiting from improving local sentiment. Meanwhile, New Zealand government bonds declined 2.6% as interest rate expectations adjusted globally.
• Currency: The New Zealand dollar performed strongly, appreciating 3.3% against the US dollar.

Global Market Themes: Oil & The AI Landscape

Global equity markets in July experienced a clear rotation in investor preferences.

Early in the month, escalating tensions between the US and Iran briefly pushed Brent crude oil above 100 USD per barrel. As geopolitical fears moderated, market focus returned to second-quarter company earnings.

During the earnings season, investors grew wary of Artificial Intelligence (AI) related businesses. Concerns over profitability, valuations, export controls and advancing competition from China led to a sell-off in semiconductor and other tech stocks, while investors rotated capital into value-oriented sectors such as energy and financial services.

Overall, global shares fell 2.7% in NZD terms, driven by declines in growth (-5.6%) and smaller companies (-5.5%), whereas value stocks held steady (+0.3%).

Global bond markets declined 3.7% in NZD terms over July. Higher energy costs and resilient economic data in key regions prompted markets to price in a “higher for longer” stance on central bank interest rates. While major overseas central banks held policy rates steady during their July meetings, their cautious outlook kept government bond yields elevated worldwide.

Regional Snapshots

United States

Economic indicators in the US pointed to a mild cooling in growth:

• Second-quarter GDP growth came in at 1.5%, slightly lower than anticipated. Consumer confidence, business activity indicators (PMIs), industrial output, and job creation all showed softer trends. Meanwhile, annual inflation moderated to 3.5% in June, below market forecasts.
• US equities were virtually flat, with the S&P 500 index adjusting by -0.1% in USD. US Treasury bonds fell 1.1% in USD as yields rose alongside energy costs.

Europe

The Eurozone showed promising underlying economic momentum:

• Second-quarter economic growth beat forecasts at 0.9%, accompanied by expansionary business sentiment, while preliminary July inflation came in at 2.9%.
• European equities gained 1.3% (STOXX Europe 600 in EUR), though European government bonds fell 1.6% in EUR.

Asia & Australia

• Australia: The ASX 200 Index performed strongly, rising 2.3% in AUD.
• Japan: Japanese shares edged up 0.2% in JPY, with domestic and industrial companies offsetting technology drag. Government bonds dipped 0.6% in JPY.

Looking Ahead

Short-term market swings driven by commodity prices and sector rotations are a natural part of market cycles. Our portfolio management approach remains focused on underlying business fundamentals, diversification, and long-term value creation.